The Biden administration began implementing policies designed to restrict America’s domestic oil supply on its first day. The steadily increasing fuel costs that have resulted are signaling higher consumer prices across the board in the coming month.
President Biden has set a policy agenda that prioritizes what he describes as “green energy” while canceling the permits for construction of the Keystone XL Pipeline designed to serve the heartland.
The comprehensive infrastructure bill that the administration continues to press for prioritizes the Democrats’ climate change agenda at the expense of domestic energy development. Despite campaign promises to the contrary, Biden has halted fracking and oil leasing on federal lands since taking office.
Gas prices were reported on July 6 by AAA at a nationwide average of $3.13 a gallon. In comparison, the average price on January 1 was $2.25 per gallon. Throughout the summer, prices are predicted to rise to “well over $3.25.” It will be the highest average gas price since October 2014.
Meanwhile, the White House appears to be focusing on negotiating with foreign producers rather than reconsidering the value of allowing domestic oil production to meet America’s fuel needs. Press secretary Jen Psaki was asked last week about gas price surges and stated, “that’s why our team is constantly monitoring gas prices and directly communicating with OPEC parties to get to a deal and allow proposed production increases to move forward.”
The Federal Reserve is likely to face difficult decisions due to rising gas prices that could quickly lead to increased consumer prices for other goods. As long as the Fed can maintain its version of “transitory” inflation, it is likely to continue with current interest rates intact.
Peterson International Economics Institute Senior Fellow David Wilcox has recently discussed the effects that increased fuel costs have on consumer expectations about inflation.
“I don’t expect the price of oil to be the last straw on the camel’s back, but it is another straw on a camel’s back that’s already carrying a fair amount of baggage. There is a much greater risk today of inflationary psychology taking hold than I would have said three to five years ago,” Wilcox said.
The increased costs of transportation and production factors for many agricultural goods are likely to place continued pressure on grocery bills upward. Sylvain Charlebois, director of the Agrifoods Analytics Lab, expects to see continued food price inflation, stating that some prices have gone up more than 10% this year.